2019 (2) TMI 1570 - Tri - Insolvency and Bankruptcy

Application for Corporate Insolvency Process Dismissed Due to Genuine Dispute

HILLVIEW COALS P. LTD. Versus SUPER INFRATECH P. LTD.

The Tribunal dismissed the application for initiation of Corporate Insolvency Resolution Process (CIRP) under sections 8 and 9 of the Insolvency and ... Initiation of corporate insolvency resolution process - existence of dispute - HELD THAT:- As rightly been pointed out from the side of CD that the documents, annexed with the application, clearly evince that there exists a dispute between the OC and CD in respect of the debt in question and such dispute came into being as early as 2012-2013. Such revelations, in my firm view, show that the lapses on the part of CD in not complying with the direction in section 8(2)(a) of the Code of 2016 cannot be allowed to grow beyond its size so as to come in the way of accepting the prayer of the CD made in the counter affidavit. On considering the pleadings of the parties in their totality having regard to the submissions, advanced by learned legal representative appearing for OC as well as learned senior advocate appearing for the CD, as found reason to conclude that the CD could establish that there is a dispute between the parties hereto regarding the debt in question which is not spurious, hypothetical or illusory and such dispute was there since long before the initiation of present proceeding. Resultantly, this proceeding is dismissed for the reasons aforementioned. Issues Involved:1. Application for initiation of Corporate Insolvency Resolution Process (CIRP) under sections 8 and 9 of the Insolvency and Bankruptcy Code, 2016.2. Existence of a pre-existing dispute regarding the debt claimed by the Operational Creditor (OC).3. Territorial jurisdiction of the Civil Court.4. Compliance with section 8(2)(a) of the Insolvency and Bankruptcy Code, 2016.Detailed Analysis:1. Application for initiation of Corporate Insolvency Resolution Process (CIRP) under sections 8 and 9 of the Insolvency and Bankruptcy Code, 2016:The OC, M/s. Hillview Coals P. Ltd., filed an application under sections 8 and 9 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of CIRP against M/s. Super Infratech P. Ltd. (the Corporate Debtor or CD). The OC claimed an outstanding debt of Rs. 4,48,90,155.00. The OC submitted various documents, including bank statements, to support its claim that the amount remained unpaid.2. Existence of a pre-existing dispute regarding the debt claimed by the Operational Creditor (OC):The CD opposed the application, arguing that there was a pre-existing dispute regarding the debt. The CD contended that the OC abandoned the work midway, causing delays and resulting in penalties imposed by Brahmaputra Cracker and Polymers Ltd. (BCPL). The CD had to engage another contractor to complete the work, leading to additional costs. The CD also highlighted that it had raised a demand for Rs. 41,63,968.00 from the OC for the losses incurred due to the delay.The Tribunal referred to the definition of 'dispute' under section 5(6) of the Code and the Supreme Court's interpretation in the case of K. Kishan v. Vijay Nirman Co. P. Ltd. The Tribunal concluded that the dispute was not spurious, hypothetical, or illusory and had existed long before the initiation of the present proceeding.3. Territorial jurisdiction of the Civil Court:The OC had previously filed a money suit (Money Suit No. 115 of 2013) before the Civil Judge, Senior Division at Kamrup, Guwahati, seeking a decree for the dues. The CD challenged the territorial jurisdiction of the court, and the Gauhati High Court ruled that the court at Guwahati had no jurisdiction. The trial court was directed to return the plaint to the plaintiff for filing in the appropriate court at Dibrugarh. Instead of pursuing the claim in the appropriate court, the OC approached the Tribunal under the Insolvency and Bankruptcy Code, 2016.4. Compliance with section 8(2)(a) of the Insolvency and Bankruptcy Code, 2016:The OC issued a demand notice on January 11, 2018, which was served on the CD on March 9, 2018. The CD did not respond to the demand notice within the stipulated 10-day period as required under section 8(2)(a) of the Code. The CD argued that the existence of a pre-existing dispute was evident from the documents annexed with the application, including the correspondence and the money suit filed in 2013. The Tribunal found that the CD's failure to respond to the demand notice did not negate the existence of a pre-existing dispute.Conclusion:The Tribunal dismissed the application for initiation of CIRP, concluding that there was a genuine pre-existing dispute regarding the debt. The Tribunal emphasized that the Insolvency and Bankruptcy Code, 2016, is not a substitute for civil law dealing with the recovery of dues and should not be used as a means to recover debts. The Tribunal clarified that the dismissal of the application would not prejudice the applicant's rights in any other forum.